Fico makes credits scores free — for almost no one

The vast majority of consumers still have to pay $20 to get their score

By

AnnaMariaAndriotis

FICO says consumers can finally see their credit scores for free. Here’s the catch: almost 99% of consumers still have to pay.

The company behind the most important measure of American consumer credit made a big deal of its new “FICO score open access” program, designed to take some of the mystery and confusion out of those pesky three-digit numbers, but failed to mention how limited it currently is. Fewer than 2.2 million people (or about 1.2% of all credit-card holders) can now see their score free of charge, as it’s limited to lenders who agree to display this information. “There’s definitely a lot of fizzle to this,” says John Ulzheimer, consumer credit expert with CreditSesame.com, a credit management site, and a former manager at FICO.

Michael D Brown / Shutterstock.com

FICO’s move comes as competition in the credit-score market continues to grow. There are now at least seven types of credit scores being marketed to consumers, and many have been available for free for years. FICO, in contrast, has continued requiring a payment — $19.95 for a single score from the company’s site. Credit experts say its lack of availability has led to a name recognition problem in the consumer market. Most consumers are familiar with the term “credit score” but few can actually differentiate between all the different brands, says Ulzheimer.

And here lies the conundrum for a lot of consumers. While many credit scores have been available for free, they aren’t the ones used by most lenders. Borrowers meanwhile see a credit score and think they know where they stand in the eyes of a lender and are then surprised when they are denied for a loan or receive less favorable terms than they anticipated. FICO is used in 90% of consumer lending decisions, according to CEB TowerGroup, a financial-services research firm. The only time it’s given out for free: when consumers apply for a mortgage and the FICO score is used, lenders are required to present them with that score.

FICO, for its part, says the service has a dual role: to educate consumers about where they stand with lenders and to build its brand. Fifty-six percent of consumers don't know their FICO score, according to figures released last month by the American Bankers Association. “We want to make it clear…why [it’s] important” they do, says Anthony Sprauve, senior consumer credit specialist at FICO.

To be sure, the FICO announcement suggests the company may be turning a corner. The score consumers see will be the specific FICO score (there are many variations of this score) that a lender looks at when it is maintaining their account and making decisions that could impact the terms on their existing loan. That’s a more useful score than the FICO score consumers pay to get, which shows them an overall figure for where they stand.

Yet somehow, access to a free FICO score remains limited. So far, just two lenders are willing to provide the free scores: credit-card issuers Barclaycard and First National Bank of Omaha. Collectively, they account for less than 2% of purchase volume in the credit card market, according to estimates from CardHub.com, a credit-card comparison site. These issuers say they are planning on allowing all of their cardholders to view their score in the near future and that they’re offering the service in part because they think it will boost their customer loyalty.

FICO also says its free-score access program will grow. The company is working on contracts that would result in more lenders offering this service and expects roughly 25 million consumers (or about 5.5% of all credit card holders) to gain free access to their FICO score by the end of the year, says Sprauve. “This is just the beginning,” he says.

Still, there are more setbacks for consumers. On a large scale, the program doesn't address the lack of clarity consumers have when it comes to their FICO score. In most cases, consumers want to see their score before they apply for a loan to have an idea of whether they’re likely to get approved. But the two lenders partaking in the program are only making the score available to existing customers. (FICO says it is up to the lenders to decide whether to show the score to consumers who are applying for new credit with them.)

It also doesn’t provide a new service when borrowers are declined for credit. Lenders are already required to provide credit score disclosure notices to consumers when they deny them for credit because of their credit score or take another score-based adverse action like approving a loan with poor terms. This notice shows the exact score the lender used to make the decision.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.